NEW YORK: The US government has announced an increase in the energy investment credit for qualifying solar and wind facilities benefitting low-income communities. The Inflation Reduction Act provides for this increase, which is available to taxpayers who receive an allocation of environmental justice solar and wind capacity limitations.
To be eligible for this increase, taxpayers must apply for and receive an allocation of capacity limitation with respect to their facility. The Department of the Treasury and the Internal Revenue Service have developed the Low-Income Communities Bonus Credit Program to allocate capacity limitations. The program is open to eligible solar and wind facilities that are placed in service in low-income communities or on Indian land, or that are part of either a qualified low-income residential building project or a qualified low-income economic benefit project.
The annual capacity limitation for each of the calendar years 2023 and 2024 is 1.8 gigawatts, divided across the facility categories. For 2023, 50% of the capacity limitation within each category is reserved for facilities meeting certain ownership and/or geographic selection criteria, known as additional selection criteria.
Facilities that receive an allocation must be placed in service within four years of the date of the allocation award. Facility owners will report to the Department of Energy that the facility has been placed in service through the same portal they used to apply.
Taxpayers who are eligible to claim the increase to the energy investment credit will calculate their energy investment credit and the increase by using Form 3468, Investment Credit. The credit increase will be calculated as the basis of eligible property in the solar or wind facility and the applicable increase of either 10 or 20 percentage points, based on the project category under which the facility was awarded an allocation.
The DOE and the Treasury Department hosted a virtual informational webinar for potential applicants on September 29, 2023. Additional information can be found on IRS.gov and the Department of Energy website.
Overall, this increase in the energy investment credit for solar and wind facilities benefitting low-income communities is a positive step towards promoting renewable energy and environmental justice.